1Q 2020 Results Conference Call 1
U S I N G F L E X I B I L I T Y T O M A N A G E T O D A Y ’ S V O L A T I L I T Y Current Priorities & Recent Actions Cut Costs, Drive Preserve Liquidity & Protect Health, Safety Active Production Capital Efficiencies Balance Sheet Strength of Our People Management $200 MM in cash cost 1 savings 2Q-4Q hedge value ~$1.1B Assembled multi-disciplined Dynamic production “shut-in” strategy Pandemic Response Team 2H20/21 capital costs ~20% Utilized flexibility with lower vs 2019 immediate response to Moved seamlessly to Strong hedge book and reduce 2Q capex $500 MM “remote” work environment shutting in highest cost wells Expect majority of savings to with no penalties means minimal cash flow be durable Screening measures and impact Purchased $100 MM of safety protocols successfully notes (’21 - ’22) at 11% discount, implemented in field reducing interest expense, operations extending maturity profile & Safe “return to work” strategy lowering debt underway Priorities give OVV tremendous resilience and position us to thrive 2 1) Additional detail on cash cost savings available on slide 21 of this presentation. These savings refer to operating, transportation and processing G&A, and other cost outlays and recoveries
1 Q H I G H L I G H T S Strong 1Q Results Exceed Expectations Net Earnings $421 MM Cash Flow Ŧ Liquidity $1.62 / share $535 MM $3.4B 1 Operating Earnings Ŧ $2.06 / share Investment Grade $27 MM $0.10 / share Capex ($ MM) Production (MBOE/d) Total Costs ($/BOE) Ŧ $865 571 $12.77 $790 552 $12.17 1Q capex $75 MM lower 1Q Production 1Q Total Costs Ŧ 5% lower driven by efficiencies 19 MBOE/d higher Original Original Original Actuals Actuals Actuals 1Q20 1Q20 1Q20 1Q Budget 1Q Budget 1Q Budget 3 1) Total liquidity includes $190 MM of available capacity on uncommitted demand lines Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures see the Company’s website and disclosure in the appendix of this document
M A N A G I N G T H E B U S I N E S S Q U A R T E R - T O - Q U A R T E R Rapid 2Q Response ~$1.1B Rapid Response to Current Conditions • 2Q capital reduced by >60% ($500 MM) Mark-to-market value of OVV • Restructured hedges provide increased 2020 protection hedge book (2Q-4Q20) 1 Proactively Managing Capex Hedge Value (WTI & NYMEX Gas) 1 MTM ($ MM) Capex ($ MM) Total >$800 NYMEX Gas $500 WTI Oil $75 $335 $280 $35 $250 - $300 $150 $425 $300 $280 Original 2Q20 2Q20 1Q 2Q 3Q 4Q 2Q Budget Guidance 4 1) Hedge mark to market and values for 2Q-4Q20 based on pricing and oil and natural gas benchmark positions as of April 30, 2020
M U L T I - Y E A R R E S I L I E N C Y $200 MM of Sustainable Cash Cost Savings $200 MM of cash cost savings in 2020 Cash Cost Savings ($ MM) Reduced operating and midstream costs • $300 Lower G&A, interest and other costs • Midstream optimization • Cost reductions over and above shut-in related costs • $200 and price-driven production tax reductions Legacy costs drop $100 MM+ in 2021 $100 Primarily unutilized midstream costs that expire in ‘21 • $0 Combination improves 2021 2020 2021 cash outlook by $300 MM Durable Cash Cost Savings Legacy Cost Savings 5
D R I V I N G C A P I T A L E F F I C I E N C Y Track Record of Efficiency Improvements Core 3 Assets demonstrating capital efficiency gains New Well Cost ($ MM) • 1Q well costs across all assets 9% lower vs 2019 – cost reductions Play D&C DC&E achieved BEFORE oil price collapse Permian $5.6 $6.2 • Expect ~20% savings in 2Q20 and beyond vs 2019 STACK $5.0 $5.4 Montney $3.5 $3.7 1Q20 D&C rates achieved pre-downturn, ability to capture additional savings D&C ($ M) / 1,000 ft $820 Pacesetter $740 FY18 – FY19 $680 $640 $640 1Q20 Go forward $560 $540 $500 $500 $500 $490 $470 Permian STACK Montney Note: DC&E includes: Drill, complete, facilities and lease tie in costs. STACK and Permian well lengths normalized to 10,000 ft. Montney normalized to 7,500 ft. Montney costs displayed in USD. FX rate is 0.7. Montney 6 assumes 50% Pipestone and 50% Dawson
W O R L D C L A S S O P E R A T O R Capital Efficiency More Important Than Ever Permian Drilling – Total Well (ft) / day • 17% increase in lateral lengths vs FY19 leads to 15% reduction 2,000 in drilling cost per foot • Drilling innovations and Simul-Frac reduce 1Q D&C costs 1,500 $400k/well vs FY19 Anadarko 1,000 • 13 wells drilled and completed for under $5 MM 1 2018 2019 1Q20 • Continued operational gains: 14% faster spud to rig release Completions – Lateral Length (ft) / day and 18% increase in completed lateral feet per day vs 4Q19 3000 • Supply chain management delivers significant savings 2500 Montney 2000 • Industry-leading drilling cycle times 1500 • Pump time in Pipestone completions increased 16% vs FY19 1000 500 2018 2019 1Q20 Permian STACK Montney 7 1) Well lengths normalized to 10,000 ft
F L E X I B I L I T Y T O R E S P O N D T O O I L P R I C E D R O P Dynamic Shut-in Strategy Preserves Value Dynamic analysis factors • Variable expense/margin analysis & contango valuation • Continuously updated based on market environment Shut-in net production (May 7): • No onerous MVCs 1 provides considerable flexibility • Market conditions vary by asset ~35 Mbbls/d • Control of operations: >95% of wells are operated Oil and condensate • Production planning closely aligned with customer requirements ~65 MBOE/d • Current gross shut-ins: ~50 Mbbls/d crude and condensate and ~92 MBOE/d Oil Equivalent Favorable hedge position minimizes cash flow impact Market conditions to drive timing of returning production • Operational Control Centers enable well restarts in <24 hours 8 1) MVCs: Minimum Volume Commitments
U N D E R S T A N D I N G O U R C R E D I T F A C I L I T I E S Our Liquidity is a Valuable Asset Our credit facilities are: OVV Debt / Adjusted Capitalization Ŧ Unsecured 80% Fully committed/available to July 2024 Based on adjusted book capitalization 70% 60% Covenant Supported by 20 lenders, all are A- rated or better Our credit facilities do not have: 60% X A Borrowing Base / annual redetermination 50% Cash flow / EBITDA / leverage covenants X Substantial Covenant X Minimum credit rating requirement Headroom (2X) 40% 30% Financial Covenant Calculation 1Q20 28% 28% 20% Long-Term Debt, including current portion $7,006 Total Shareholders’ Equity $10,191 10% Fixed add-back Equity adjustment 1 $7,746 does not change 0% Adjusted Capitalization $24,943 YE 2019 1Q20 Debt to Adjusted Capitalization Ŧ 28% 9 1) Fixed amount reflecting cumulative historical ceiling test impairments recorded as at December 31, 2011 in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures see the Company’s website and disclosure in the appendix of this document
2 0 2 0 - 2 1 S C E N A R I O S Positioned to Thrive in 2021 and Beyond FCF Ŧ breakeven lowered and scale maintained through capital efficiency and cost reductions ‘21 FCF Ŧ Positive $1.4 – $1.6B ~200 Mbbls/d 2021 capex scenario; 20% Post dividend at $35 / $2.75 Avg 2021 Oil & C5+ capital efficiency gain vs ‘19 Significantly Lower “Stay-Flat” Capital Scenario 2020 Scenario: “Stay-Flat” Capital Lower by >30% $1.8 - $1.9B of capex and 200 Mbbls/d Oil & C5+ exit rate • 2021 Stay-Flat Scenario: ~$2 - $2.4B Capex Oil & C5+ flat at 200 Mbbls/d at $1.4 - $1.6B of capital • $1.4 - $1.6B Capex $300 MM of cash cost reductions and lower legacy costs • 20% gain in capital efficiency vs 2019 • FCF Ŧ positive at $35 / bbl WTI oil and $2.75 / MMBtu NYMEX gas • Unhedged price sensitivities: • WTI $5 / bbl: $375 MM Previous Current • As at 2019 As at 2021 NYMEX Gas $0.25 / MMBtu: $140 MM • 10 Note: Capital investment scenarios do not represent formal guidance. Declaration and payment of future dividends subject to Board discretion Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures see the Company’s website and disclosure in the appendix of this document
T H E R O A D A H E A D Positioned to Thrive Maintaining operational scale Driving down cash costs increases future cash flows Full flexibility to manage the business Preserving liquidity and balance sheet strength Proven leadership and track record of performance 11
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